The development comes as U.S. Defense Secretary Donald Rumsfeld met with Indian leaders to stem tensions between India and Pakistan over Kashmir.

The fighting took place in the village of Atholi in the hilly Doda district, about 200 kilometers south of Srinagar, police said.

Initially, police said the seven were killed in a fight with police officers, but later they said police arrived after the shooting was over and that the seven had been killed when they got into a fight among themselves.

Indian police said six of the victims were members of the Islamic militant group, Hezbul Mujahedeen. The other man was a member of Lashkar-e Taiba, another Islamic militant group fighting to end Indian rule in Kashmir.

Despite recent pledges by Pakistan's leadership to end the infiltration of Islamic terrorists into Kashmir, Hezbul Mujahedeen's leader Syed Sallahaudin said Wednesday that Islamic militants would continue to cross from Pakistan into Kashmir.

In the last three weeks, India and Pakistan have massed hundreds of thousands of troops along their border and the Line of Control, which separates Indian and Pakistani regions of Kashmir.

Militants have waged a violent 12-year insurgency pushing for the independence of Indian Kashmir or its merger with Pakistan.

Rumsfeld is meeting with top Indian officials Wednesday -- including Indian Prime Minister Atal Behari Vajpayee.